Blog Post

Rise of Returns: How retail can combat its $351 billion problem

The next time you think about returning an item to Amazon, be forewarned: Return too many items in a year, and you might just be exiled for good.

Retail returns have become such a nightmare that even the world’s third-largest retailer has recently made waves by changing how it handles customers the company thinksabuse the system — despite touting a free and easy returns policy.

There’s no doubt Amazon’s decision is a controversial one. But its choice to ban return-happy customers, in an effort to reduce returns costs, shows the lengths retailers are willing to go.

Last year, total merchandise returns cost US retailers a staggering$351 billion in lost sales. With e-commerce return rates as high as 30 percent, that number will only climb as online retail becomes the default choice for convenience-craving customers.

Just take a look at popular online clothing seller, Revolve, who made $400 million in net sales last year, but shelled out $385 million for returns. That doesn’t even take shipping costs into account.

Revolve and Amazon are just two of the hundreds of retailers grappling with these losses. Despite growing concerns, many retailers see free and flexible return policies as an essential part of staying competitive — ignoring (for now) the risk that this billion-dollar “ticking time bomb” might one day go off.

That’s why many retailers are finding new alternatives to speed up resales, create more convenient returns experiences, and use flexible policies as a customer selling point.

Crowdsourcing delivery for faster, 1:1 customer returns

The rise of online retail has created new customer expectations for fast, flexible services that cater to their needs. While many retailers are ramping up same-day delivery, few have focused on returns. Even Amazon requires most customers to drop off returns at the post office, despite customer demand for more convenient options.

So, why not offer customers at-home pick up? Retailers schedule a pickup through a crowdsourced delivery fleet, customers leave items outside their doors, and then someone picks it up that very same day.

More than convenience, crowdsourcing returns allows for faster, and even same-day, restock and resell. Given that less than half of returned items are resold at full price, margin-conscience retailers are under enormous pressure to turnaround product while it can still be sold a full ticket value.

Investing in return optimization technology

Instead of abandoning returns at a distribution center or landfill, retailers are looking to emerging startups to help solve their reverse logistics issues.These tech-enabled partnerships have become increasingly important since retail’s omnichannel transformation.

Based on real-time data, Optoro predicts where to route returned items and determines the most profitable resale price. While at the same time, Happy Returns provides centralized, in-person return locations for online retailers.

Some companies even try to prevent a return from happening in the first place.Supply.ai’s ReturnSense tracks customer behavior in real-time and detects the likelihood of a future return, giving retailers an opportunity to intervene and suggest a different product.

Taking advantage of your physical footprint

The emergence of omnichannel e-commerce has made way for major U.S. retailers, from Walmart and Macy’s to The Home Depot, to use brick-and-mortar stores for speedier delivery. Now, top retailers are leveraging ship-from-store capabilities to expedite returns, restocks, and resale.

For example, Best Buy has leveraged ship-from-store to accept returns at retail locations, list more “open-box” products online, and speed up its resale process. That means when a customer in Atlanta returns a laptop in-store, Best Buy can then resell it online to a customer in New York that same day.

Rather than letting distressed inventory end up in waste piles, retailers stand to gain something out of their billion-dollar returns reality. By implementing a strategic returns policy, retailers can quickly restock shelves, resell items at profit, and build a more loyal customer base.

Who knows? Some may even start lifting the ban on customers who simply change their minds.